Portability could hit LCR

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 22 Aug 2006

Mobile number portability, which is set to come into effect next month, could hit the least-cost routing (LCR) industry by almost R200 million in its first year.

Orion director Jacques du Toit says while portability is only expected to garner 5% of cell users by the end of the year, least-cost routers, who guarantee call rates, could end up absorbing the costs of incorrectly routed calls, if a system is not put in place to determine where these calls terminate.

Calculations done by the company indicate, based on a 5% move rate, this could cost the industry R192.3 million, or just over 4% of the R4.5 billion that the industry is worth annually.

International experience shows portability peaks at 13%, before dropping off to 5%, says Du Toit.

He says more than 5% of South African cellphone users are unlikely to change operators as many people are tied into contracts. From a corporate perspective, companies are also likely to implement policies that govern whether staff can move company contracts.

Moreover, most people unhappy with service are dissatisfied with service providers, and not the network, he believes. This may see people moving between providers, while remaining on the same network.

"Over 90% of new connections across the board every month are prepaid customers. These consumers have no need or desire to go through the hassle of porting. They will simply throw their old SIM card out and get a new number."

Mitigating loss

Initially, Orion expects less than half a percent of cellphone users to port their numbers. This is why the company is working on a break-even model for implementation of new infrastructure that will access a database of all cellphone users who have migrated before routing calls.

As soon as it becomes cost-effective to implement the device, the company will install it. Until that point, it will absorb the extra costs above what it has guaranteed. "Very few service providers can afford to take on a guarantee, and very few are in a situation to do their own research and development."

Du Toit explains that the database, updated at midnight every night, will contain the numbers of all users who have ported, as well as the new network. This database, owned by the network operators, makes it possible for calls to be routed correctly.

However, he says there are challenges, including reprogramming the PABX system, so that it no longer routes calls automatically, and finding enough technicians to service its 4 000-strong client base.